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UK government raids dormant bank accounts, blasts "ripoffs"

Sandy Smith's picture

The coalition government of British Prime Minister David Cameron has announced that it will use "hundreds of millions of pounds" sitting in dormant bank accounts to create a fund that would finance social and community programs undertaken by nonprofit and charitable organizations.

Cameron's announcement makes good on a campaign promise to create a "Big Society Bank" that would enable independent nonprofits to perform services the government can no longer afford to provide. The funds being raided to establish the bank come from accounts in UK banks that have been inactive for at least 15 years.

“These unclaimed assets, alongside the private-sector investment that we will leverage, will mean that the Big Society Bank will over time make available hundreds of millions of pounds of new finance to some of the most dynamic social organizations in our country,” Cameron said in a speech in Liverpool, England, today.

The announcement comes on the heels of the austerity budget approved by the governing Conservative-Liberal Democrat coalition, which imposed stiff tax hikes and across-the-board budget cuts affecting everyone from Queen Elizabeth II on down.

It also comes amidst continued criticism of the British banking sector emanating from that same government. Appearing on an episode of the BBC public-affairs program "Panorama" scheduled to air tonight, Business Secretary Vince Cable criticized the UK's banking system as concentrating too much market power in the hands of just a few banks, reducing competition and increasing the temptation for bankers to fatten their balance sheets on the backs of depositors and borrowers.

Cable also defended the coalition government's financial system reform program, saying, "What’s going to come out of this is a more competitive system where the customers are not ripped off."

The coalition government had been critical of its Labour predecessor's bailouts of two large British banks, Royal Bank of Scotland Group plc and Lloyds Banking Group. Its move to create the "Big Society Bank," however, takes advantage of a bill passed by that government allowing the government to use unclaimed funds in dormant bank accounts "for social or environmental purposes."

Sources: Bloomberg News, Her Majesty's Government

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